DEWA completes loan refinancing

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The pressure on DEWA’s ratings has eased after the authority successfully refinanced a $2.2 billion loan. Reduced capex commitments will also help.

The Dubai Electricity and Water Authority extended a $2.2 billion loan at the end of March ahead of the April refinancing deadline for the facility, in a move that eases recent pressure on its credit ratings.

A total of 15 banks participated in the new three-year facility, which was arranged by RBS, Standard Chartered and Dubai Islamic Bank. The deal is understood to pay a margin of 300bps over Libor, against 30bps on the original facility, and the banks are also receiving a 20bp commitment fee.

Doubts over DEWA’s ability to refinance the loan without support from the Government of Dubai – whose own sovereign rating is under threat – saw the rating agencies take negative action against the authority in recent months. Moody’s put DEWA’s rating on review for possible downgrade in February, while Fitch dropped its long-term rating a notch from AA- in December.

The fact that DEWA was able to refinance the debt on its own, with an enlarged group of banks – 11 took part in the previous loan – has clearly reassured the agencies.

“It’s good to see that they actually did so,” said an analyst at one.

The analyst said the additional cost of servicing the debt over the next three years should not have any ratings impact, as reductions in the authority’s capex programme over the period would strengthen its financial profile regardless.